Daily Market Review 21/8/2015

STOCKS

Netflix Shares Decline on Uncertainty: On Thursday, the shares of Netflix Inc. (NFLX, -7.83%) declined by as much as 8.3 percent. This drop came about as other stocks in the media sector also saw declines. The downward trend was led by the Walt Disney Co. (DIS, -5.98%) whose shares decreased by 5% while the shares of CBS Corp. (CBS, -3.74%) also dropped by more than 4 percent. According to Rich Greenfield, an analyst from BTIG who is bullish about Netflix, the provider of on-demand Internet streaming media is currently being dragged down by the entire media sector. Greenfield stated that there has been a fundamental shift in the media sector with regards to the behaviors of consumers. He went on to explain that it is evident that the market now understands that traditional media companies are simply not prepared for this shift. Other declines were seen with DISH Network Corp. (DISH, -4.34%) shares which dropped more than 3%, Viacom Inc. (VIAB, -5.43%) shares fell 4%, Time Warner Inc. (TWX, -4.03%) shares declined 3% while the shares of AMC Networks Inc. (AMCX, -3.68%) also moved down by 3 percent. These declines come only 2 weeks after there was a major selloff in the media industry. This selloff was prompted by a lack of confidence among investors as a result of the poor earnings reports released which made it quite clear that consumers are now moving away from traditional forms of media. On the upside, Greenfield stated that as Netflix is being pulled down, this is an ideal time to buy shares in the company. To put it into perspective, the shares of Netflix have increase by more than 120 percent in the year to date. In comparison, over the same period, the S&P 500 index (SPX) has declined 0.22%.

INDICES

In U.S. trading on Thursday, stocks traded lower. This decline was led by a major selloff in consumer, financial, technology as well as media stocks while concerns regarding a slowdown in global growth also weighed on stock prices. As a result of this, the CBOE Volatility index (VIX, +18.82%) jumped and over the past 3 trading days, we have seen a gain of more than 38% to 17.75 in the index. As investors sought safe havens, gold and Treasuries rallied. At the close of trading, the S&P 500 index (SPX) declined 1.5%, or 31 points, to 2,048.27. This benchmark index has now turned negative for the year and is also trading below its 200-day moving average. This could be a key indication of a larger pullback. Also on the downside was the Dow Jones Industrial Average (DJIA) which dropped 1.5%, or 267.31 points, to 17,081.65. Meanwhile, the tech heavy Nasdaq Composite index (COMP) also declined 2.2%, or 111.03 points, to 4,908.88. The index’s heaviest-weighted member Apple Inc. (AAPL, -2.17%) also slid by 2 percent.

CURRENCIES

On Thursday, the U.S. dollar traded lower. This came after data released showed that the number of individuals who filed for unemployment assistance rose last week to 277,000, up 4,000. In a separate report, data showed that existing home sales in July rose to the highest level in 8 years in July. Also on the upside was the manufacturing activity in the Philadelphia region which grew at a faster than expected rate in August. Wednesday’s FOMC minutes showed that Fed officials believe the economy is nearing the point where interest rates should move higher, yet they did state that the subdued inflation outlook and weakness in the global economy could still pose risks to the U.S. economic outlook. The EUR/USD traded at 1.1192, up 0.67% while the GBP/USD traded at 1.5671, holding below Tuesday’s 7-week peak of 1.5716. Against the New Zealand and Canadian dollars, the U.S. dollar traded lower with the NZD/USD up to 0.6625 while the USD/CAD traded at 1.3098, down 0.22%. Also, the US dollar index was at 96.01, down 0.43%.

COMMODITIES

In early Asian trading on Friday, crude oil prices declined moving below $41 a barrel. This came after disappointing data was released from China which negatively impacted demand prospects. The Caixin China Manufacturing PMI flash declined to a 77-month low at 47.1. This missed expectations for a reading of 47.7 for August. Also, for August, the Nikkei Japan PMI Manufacturing survey dropped to 51.9. WTI crude oil for delivery in October traded at $40.89 a barrel on the New York Mercantile Exchange. Meanwhile, on the Intercontinental Exchange (ICE) in London, Brent crude for delivery in October closed at $46.53, down 1.34%, or $0.63. The current spread between the U.S. and international benchmarks of crude is at 5.34.

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